Maryland Comptroller Peter Franchot proposed a series of rules and restrictions Thursday designed to ensure daily fantasy sports are operated fairly in Maryland, even as renewed doubt was cast about the games' legality under state law.
The new regulations — the first in Maryland — include restricting most players' maximum monthly spending to $1,000 and barring sophisticated players from using computer programs that give them an advantage over more casual competitors.
"We want to make sure that everything is on the level here," said Franchot at a media briefing. "I'm happy to join our sister states that have already done that."
In fantasy games, participants pay to select actual players in football and other sports, accumulating points based on the players' statistical performances. They lose money if their teams perform poorly and win if they perform markedly better than other participants.
The comptroller's rules, which require a public comment period and wouldn't become effective until at least October, come amid increasing questions about whether a 2012 state law permits daily fantasy wagering.
In a Jan. 15 advisory opinion, the state attorney general's office said the games may not be legal because the issue was not referred to a statewide ballot referendum — a procedure required under state law to expand commercial gaming.
In a memorandum this week, Brian L. Oliner, counselor to the comptroller, cited that opinion and added: "Although the matter is not free from doubt, daily fantasy sports are more likely than not illegal under Maryland law."
The memorandum, sent to members of the comptroller's staff who crafted the new regulations, also noted that traditional, season-long fantasy sports are legal. As a result, such fantasy pools among friends or colleagues, including those hosted by Yahoo and ESPN, don't fall under the comptroller's proposed regulations.
"We're not seeking to regulate what I call the beer and chips league," Franchot said.
With the new rules, Maryland would follow the lead of other states — such as Virginia and Massachusetts — that have adopted consumer-protection rules.
The Maryland law grants regulatory authority over fantasy sports to the comptroller, who decided to step in after the General Assembly adjourned in April without taking final action on any of several bills regarding daily fantasy play, leaving the games' status murky. The sports sites had lined up top lobbyists and attorneys before the session to build support for keeping the games going.
"The General Assembly declined to act during the last session," Franchot said. "That's why I believe it is incumbent on us to step into the breach."
Maryland's new rules include:
•Capping players' spending at $1,000 a month. Exceptions would be permitted for players who request it and are deemed by the fantasy operator to be able to afford more wagering.
•Banning computer scripts "that provide a fantasy sports player with a competitive advantage over another fantasy sports player." Such scripts can allow automatic lineup changes by players who may enter hundreds of times a day.
•Requiring operators to offer competitions limited to beginners and attach a symbol to the usernames of "highly experienced" players so they are clearly identified.
•Prohibiting players under 18 and games based on amateur sports.
•Requiring operators to inform Maryland players of tax obligations resulting from winnings.
"I think it's a positive step," said Del. Eric Luedtke, a Montgomery County Democrat who is co-chair of the joint gaming committee, of the rules. "It looks like what the comptroller is proposing gels pretty well with what the House was contemplating [in the last session] before things broke down."
The regulations will apply to New York-based FanDuel, Boston-based DraftKings and other operators running similar games. The two companies — whose operations have been challenged in other states — issued statements Thursday supporting the comptroller's action.
FanDuel said the rules strike a balance "between ensuring fans can continue to play, embracing a growing industry that can be an economic engine and installing firm regulations for fantasy sports companies to protect consumers."
"Comptroller Franchot took a thoughtful approach," the statement continued, "with proposed regulations modeled after some of the best and strongest fantasy regulations installed in states across the country. We are still reviewing the details and look forward to working with the Comptroller through the comment period."
Griffin Finan, director of public affairs for DraftKings, said: "DraftKings is committed to working closely with regulators across the country and globally to establish the best consumer protections and policies that allow our sport-tech company to grow while protecting consumers. We applaud the Comptroller of Maryland for putting forth a thoughtful and measured approach to regulating daily fantasy sports contests in Maryland and we look forward to working with regulators to ensure our customers in Maryland have the best experience possible while playing the games they love."
The industry claims at least 200,000 Maryland players, according to the comptroller's office.
Once known mainly as platforms for friends and relatives to play against one another over the course of weeks or months, fantasy sports is now an intensely competitive industry supported not only by consumers but by substantial investments from media companies and professional sports leagues.
According to court filings, DraftKings has partnered financially with Fox Sports, Major League Baseball and the owners of the NFL's New England Patriots and Dallas Cowboys, among others. FanDuel investors include the NBA, NBC Sports Ventures and ComcastVentures. The NFL has not partnered with either company.
Under the 2012 Maryland law, fantasy competitions are exempted from other gambling prohibitions, saying they reflect "the relative skill of the participants." The measure was sponsored by then-Del. John Olszewski Jr., who said he participated in a season-long fantasy football league before the bill was enacted that he guessed cost him $20 or $25 for the season.
That's a far cry from what the online industry has become. FanDuel said in ads during the last football season that it would pay out an "expected $2 billion in real cash prizes this year," while DraftKings advertised "More than $1 billion guaranteed."
"Let me just say the horse is out of the barn on this particular activity," Franchot said.